Bookkeeping: Cutting Emergent BioSolutions (EBS) Exposure in Half

As I mentioned in this weekend's summary, I was noticing the leadership stocks stalling out even during our late week rallies. I opined we might get a similar act to what we saw in many parts of 2008; what I called the "rotational correction" - a place where the market would go sideways or indeed even up, but different groups would get trashed in rotational order. I said in fact with a very short term trading time frame I'd actually be leaning towards financials and "global growth" stocks to take advantage of this (I don't trade that time frame here for the fund but just threw it out there for those who daytrade or have 1-3 day type of time frames). Thus far this has happened - the interesting part is the "next step". While bulls are getting happy about the "action" I'm getting pensive. What I'm seeing is oversold conditions being worked off in the "worst of" groups while the leaders large (McDonalds/Walmart) and small (the things we own) stalling out. If you are a bull you have to hope this rally spreads from the "worst of" breed + "daytraders jumping in and out of commodities" and back to the leadership stocks. Or we're toast.

I'm watching all these names that are stalling very closely because a stalled momentum stock can turn into a falling star very quickly. One such name I highlighted this weekend was Emergent BioSolutions (EBS) - today's action has turned me extremely cautious.

I am going to cut back the position in half (I had already made the stake smaller as I was worried it would be hit when the market was hit) - going from a 1.3% stake to 0.65%. An aggressive trader would actually short here with a stop loss over the 50 day moving average. To get bullish on this name again I'd like to see a move back to $24... for now it's in a holding pattern for me with risk to the downside.

Again, I speak about Generals - the Generals have not been hit in this correction. They've run all January as if the market has been up 10%, not down 10%. When I start seeing the stuff that should be swirling at the bottom of the toilet rallying, and the generals starting to be handed cigarettes and blindfolds I get nervous. Even the Obama stocks are starting to look quite iffy and if you cannot believe in SuperObama what can you believe in? Too early to tell if the next step is the firing line for the Generals, but better safe than sorry.

Long Emergent BioSolutions in fund; no personal position